I don't remember for certain whether Levine testified on this issue while on the stand but this concept was addressed in several places within his expert report and the point has been made in a number of the LTW Plaintiffs bankruptcy papers. Without regard to whether Levine addressed it in his direct testimony, it is fair game for Steinberg and Hochman to address in their post-closing brief. Whatever the legal team feels are the most salient arguments will be the ones that ultimately end up in their post-closing brief because the parties agreed to limit their submissions to a certain number of pages so the arguments have to be succinct. By the time the Judge gets to read 3 rounds of written submissions she will have likely forgotten what was said on the stand if those points are not addressed in the written submissions.
As far as the "stock warrant" issue goes, to me it matters not what they are called because it is the economic substance (supported by the contract itself) that should prevail. It is also my opinion that when filtered through FASB 150 (now codified in various sections of ASC 480), the LTWs come out on the otherside first as an "obligation" and ultimately a "liability".
The scope of FASB 150 includes securities like the Dime LTWs and specifically requires certain instruments to be recognized as liabilities, including the following:
"A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares, if, at inception, the monetary value of the obligation is based solely or predominantly on any of the following:
a) A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer’s equity shares
b) Variations in something other than the fair value of the issuer’s equity shares, for example,a financial instrument indexed to the S&P 500 and settleable with a variable number of the issuer’s equity shares
c) Variations inversely related to changes in the fair value of the issuer’s equity shares, forexample, a written put option that could be net share settled."
To me the FASB 150 argument is a winner in the battle of liability vs equity and this was addressed at the trial. FASB 150 not only clarified the term "obligation" but also amended the definition of "liability" as that term had previously been defined under Statements of Financial Accounting Concepts #6.
It is notable that Dr. Chamberlain cited the definition of "liability" from SFAC 6 in her expert report (a non authoritative definition as it has been superseded) while our expert witness properly cited to the most authoritative source, that being the now codified version of FASB 150.
This isn't the first time (in fact it isn't even the second time) in the LTW Adversary Proceeding that the Debtors have cited to a non-authoritative source or document because they were trying to hoodwink the court by slipping in a non-final version of the GSB Warrant Agreement back during the first confirmation hearing. Now they are once again trying the same tactics by citing to old accounting definitions while also trying to get this erstwhile 2002 Agreement slipped in even though apparently only one copy exists anywhere on the face of the planet even at that they can't find the real signature page and even more curious is that it was never filed with the SEC.
I'm looking forward to seeing that first post-closing brief.
GLTA
